Sport and Financial Performance Analysis Fc Barcelona Club Case L’Analyse De La Performan Ce Sportive Et Financière: Cas Du Club Fc Barcelone

105 JIBRALI & OUHADI, SPORT AND FINANCIAL PERFORMANCE ANALYSIS

Public & Nonprofit Management Review PNMReview Vol. 3.2 (2018) Special Edition Colloquim “Performance and Governance of Sport Organizations” Published online December 31th 2018 in IMIST

SPORT AND FINANCIAL PERFORMANCE ANALYSIS FC BARCELONA CLUB CASE L’ANALYSE DE LA PERFORMAN CE SPORTIVE ET FINANCIÈRE: CAS DU CLUB FC BARCELONE

JIBRAILI ZINEB OUHADI SAID University Cadi Ayyad; ENCG Marrakech

Abstract Over the period 2000-2015, Barcelona Football Club pursued different strategies and achieved different results. In the first period (in contrast to the first half), Barcelonaclub didn’twinany trophies and had many economics problems, starting from 2013, with arrival of Joan Laporta, new president of the club, the situation was changed. By analysing the club’s strategy, its financial and sporting performance over the chosen period, we try to understand the club, its context and the process of change. we explore the degree of correlation that exist between the financial and sporting performance, and which strategy used by Fc Barcelona in the last 10 years that allow it to become a best football team of the world.

Key words: Fc Barcelona, sport performance, financial performance, strategy, success

Résumé

Le club de football Fc Barcelone a poursuivi tout au long de la période 2000-2015 des stratégies différentes qui lui ont permis d’atteindre de bons résultats. Pendant la première période, le club de football avait beaucoup de problème sur les deux plans : sportif et financier. Ce n’est qu’avec l’arrivé du nouveau président Joan Laporta que la situation a changé. En analysant la stratégie qu’a mené le club sur la période 2000-2015, nous allons déterminer les facteurs gestionnaires qui ont permis au club de réussir sur les plans sportifs et financiers, tout en déterminant le degré de relation existant entre ces deux variables.

Mots-clés : Fc Barcelone, performance sportive, performance financière, stratégie, succès, cercle vicieux.

Introduction

“To be successful you have to manage the club like a multinational, for that reason we Have to organize and manage our club like a multinational with offices in lots of countries” Joan Laporta.

In the recent years, and like all industries, the sport club operates in a difficult economic climate. From the point of view of management, sport is an interesting institution to study, being similar, but also different from the traditional ones (Smith & Stewart, 2013). Over the past 30 years, the sport world has been swept away by a movement of professionalization. According to the literature, the professionalization of sport is associated with: the appearance of professional players, the revenue and sales opportunities that have emerged since the sale of broadcasting rights started (Chadwick & Beech, 2013). Nonetheless, volunteers at every level are still omnipresent: clubs, departmental committees, regional leagues and national federations, as well as all the functions: elected officials, supervisor, in charge of administrative work, sports federations. They have become organizations that are structured and managed in an increasingly professional manner. In that article, we are interested to study the relationship that may exist between financial and sport performance in Fc Barcelona club. In last 13 years, the club associated with distinctive strategies and different sporting and financial outcomes. Barcelona’s experience on the sporting and financial fronts in recent years deserves close study. In this document, we try to understand the business model or the virtuous circle appliqued by Fc Barcelona from 2003 and to found the relation that can exist between the sport and financial performance of that club. This work covers the described points and the following sections are as follow: Section 1, we start with an analyse of sporting and financial data for that club during the period2000-2007, in section 2, we examine Barcelona club sports strategy and try to explain the key of success of that club by analysing the measures taken and the results obtained over last 5 years 2010/2015.

Brief view of Fc Barcelona The Club Fc Barcelona, founded in 1899, is a club of partners whose Fundamental sport activity is football. Currently counts with other Four professional sections (basketball, handball, roller hockey And futsal) and eight non-professional and one associated section. FC Barcelona is a club of partners, that is to say a private association (non-profit organization), with its own legal personality. The statutes confirm that the general assembly of members is the governing body of the club, while the board of directors is the collegiate body of the entity who assumes all competencies that are not reserved to the assembly of partners. (Fernandez, 2012). Under the presidency of Narcís de Carreras the slogan who is coined in the media"Barça is more than a club". FC Barcelona is the most representative institution in Catalonia and one of its best ambassadors, while points out that many people, both from Catalonia and from outside Spain, "saw Barca as strong defender of democratic rights and freedoms '. In 2006

© 2018PNMReview Public & Nonprofit Management ReviewVol. 3.2 (2018) 107 JIBRALI & OUHADI, SPORT AND FINANCIAL PERFORMANCE ANALYSIS with UNICEF, whereby both institutions collaborate in actions humanitarian and solidarity with the most disadvantaged. FC Barcelona is supported by an enormous social mass, currently more than 175 thousand fans and followers, reinforces the will of its successors leaders to keep their property in the hands of their partners.

1. Financial and sport situation of FC Barcelona: from 2000 to 2007 In 2003 FC.BARCELONA was in one of the worst situations of its centenary history. In spite of investing in new players in that period, there was no sport result. The club has many problems, in addition to the sporting failure, there was a lot of economics problems and FC Barcelona was close to bankruptcy. Socially, the club was losing his fans who split into two sides, many of them asking for the president’s resignation, during this period, in 2003, the president was Joan Gaspart and was considered the worst president of club’s history. (Casals, 2010) After the elections, Joan Laporta won and for the first time, the club was managed by people with management and business knowledge. The first step adopted was to applying the principals of « adaptive reorganization » in order to improve performance and reduce cost, and then increase the organizational performance of the club. In that section, we analysed the financial and sport situation of that club from 2000 to 2005, our objective was to understand the strategy taken by FC Barcelona in that period and the show the relation that can be between that two variables.

1.1. Financial situation

We can find that Barcelona situation was precarious in that period, insofar it was classified as the sixth in term of revenue, and the important incomes were from broadcasting, the commercial situation was disappointing and didn’t matches with the size and importance of that club. If we analyse that situation, we can understand that Barcelona had a balanced model or what we call by “English model”.

Annual Report of Fc Barcelona1

If we analyse the incomes and expenses of that club from 2002 to 2007, we can understand that the club was in a precarious situation in the first year insofar of the mismanagement of Joan Gaspart. During the year of 2002/2003, Fc Barcelona had a deficit of 73 M€, wage accounted 60% of costs, Incomes of media and stadium were very low, and represented respectively 30% and 35% of total incomes. As we can see, starting in the year 2003/2004, which corresponded to the arrival of the new president Joan Laporta, revenues fully recovered and exceeded expenditures, the media and stadium incomes increased very exponentially, and even if the salaries of players and staff expanded each year, the revenues released from several activities allowed release a good result at the end of each year.

1(Barcelona, 2007)

Journal Marca 20052

Since 2000, Fc Barcelona was at the end of each year in a deficit, from 2003, the situation was changed,and we can notice that the incomes were gradually recovering all expenses

Marca 2005

The increase in costs that was noticed in our analyses of the old figures was explained during the first years by the increase in the wage costs which exceeded the 50% and even reached a

2(Marca, 2005)

© 2018PNMReview Public & Nonprofit Management ReviewVol. 3.2 (2018) 110 JIBRALI & OUHADI, SPORT AND FINANCIAL PERFORMANCE ANALYSIS very high rate of 83%, but in 2005,this situation changed and the percentage of wage expenditures in total costs declined. So, at the end of the period, if Barcelona was financially weakened, why did Barca fans have always to cheer about? The answer may be that:

. Football clubs’ financial struggles appear not to affect the fans’ mood or feelings, which Goes to show that economics is not the most important thing in a sports organization. The factors that really determine a club’s success are “extra-economic”.(Pettigrew, 1987)

. In the short term, sporting performance is more or less independent of financial and Economic performance, even though a club’s survival will depend on financial performance in the long terme.

1- Sport Strategy To understand the sport situation of that club during that period, we choose some variables to study, they are related to: continuity of the coach, squad and winning trophies.

a- Conitnuity of the coach

From 2000/2003, FC Barcelona won no trophy, in the same time, there was no continuity in football management, and the club has appointed four coaches and no one of them performed well as the frequent changes of coach show (Serra Ferrer, Carlos Rexach and Van Gaal). Victory on the pitch proved elusive, too, and the constant crises were exploited by the media, until eventually Gaspart resigned. 2003, the first year with the new board managers, Fc Barcelona with its new coach, realized a good sport performance and won 4 cups.

In conclusion, instability in management was associated in both cases with disappointing Sporting results, while continuity in management was accompanied by competition success.

b- Squad

Barcelona choose a different squad composition, with fewer stars between 2 and 3 players, a ground of junior and workhorse players. Inthe 2003-2004 season, there were more junior than workhorse players, while the number ofstars remained roughly unchanged throughout the period 2000-2005. This arrangement gavethe junior players a better chance to develop and made the best possible use of the workhorses and stars, as the squad proportions could be replicated in the first team.

c- Trophies

In the first sub-period (2000-2003), Barcelona shows an increase in losses and a decrease in wins. Starting from 2003, the situationwas reversed: the wins increase and the losses decrease.

In the first period « 2000/2003” , the club won but the level of lost and drawn increased, starting from 2003, won increased exponentially, lost lowered in a remarkable way, in that period, FC Barcelona was the cup winner.

By analysing the club's financial and sporting situation from 2000 to 2007, we can note the strong cause-and-effect relationship between that two variables. We chose this period because of the important transition that happened to our club during these years, since he passed from a precarious situation and became in a limited time among the best clubs in the world. Between 2000 and 2003, the club suffered from a financial deficit, and during the same period, the sporting situation was disappointing, the club was not able to achieve good results. When we talk about the good sports results, we don't refer to having a good ranking, or won matches, but to win trophies. Since 2003, year of arrival of the new president "Joan Laporta", the situation began to change gradually, we have witnessed financial results, and the club takes back its leadership position by winning trophies.

2. New strategy; the key of the current success The era of sporting success and world recognition of FC Barcelona, And many of its stars, is not resultof chance. On the contrary, it is a consolidation of model of premeditated action and Operation of a strategy that was well conceived with Joan Laporta and his team starting from 2003 which was implemented continuously since that period.That new strategy was based to focus on two important variables. Increase and develop the social side with an international presence in sport business environment (Mitre & Pablos, 2009). The professionalization of sport: to become professional, the sporting criteria can’t be sufficient in the long term, other area must be developed, to apply this, the board of direction developed a new business model by applying a virtuous circle in the sports domain. (Barajas & Rodriguez, 2010). This model has many process with different decisions who impact each other’s, takes into consideration the particularity of the club and its environment.

a- Sport Performance The new style of play characterized by an attack strategy was very appreciate by all fans of that game, and it became the own philosophy of FcBarcelona. All coaches havetried to take advantage of talent from the quarry. The bet to hire Guardiola as coach of the first football team for the first time in his career was an operation with some risks. But his personal values, his knowledge of the club and Special way of understanding and directing of the game, gives him some advantages and much people trusted on him. As result of that new sporting strategy, the team won three league titles consecutively (Seasons 2008/09, 2009/10 and 2010/11) as well as two other editions of the European League and the Club World Cup (2009 and 2011) and regarded as the first club throughout the history that wins all possible trophies in the season 2009/10: Champions League, Spanish League, Copa del Rey, Supercopa de Spain, European Supercup and Club World Cup.

b- Professionalism in management Start from 2003, the arrival of the new president has upset everything, Joan Laporta developed the business model of that club. He emphasized the importance to establish a new strategic plan that has gonerenewing periodically. In addition, that president incorporated his management staff, on such a way that the club must be managed as a multinational company. Among the priority aspects of government action begun by the end of June 2003, the work of knowledgeof the football industry in Europe and the benchmarking with at that time, occupied the prominent places in the ranking of clubs. Under the presidency of Laporta and even after the end of its mandate, the club occupied the top positions in special economic competition. For this it has been necessary toinvolve the social mass, professionalize the management of the club and convey the relationship that can be between investment in talent, infrastructure and modernization of management translates into the medium and long term in sports results satisfactory. To go ahead of competitions, it was necessary to reinterpret the existing logic [...].The board choose a risky route trying to make the leap in reduced time in order to gain the time lost over the last four years. The strategy was about increase the income to obtain the necessary funds to make a competitive template, recompose the inherited debt and establish a zero deficit budget, with the confidence of returning the entity to the path of profits in a short span of time. The most important objective fixed is to increase the revenue.

Ticket sales, audio-visual rights and marketing(Merchandising and sponsorship) show a certain stability in theirPercent contribution to the club budget, as we can see in figure below.

One of the strategies that has resulted in greater economic success and Social, is the program called seientlliure (free seat). The club managed the right to occupy the fixed location assigned to each subscriber in the case he decides, for any reason not to attend a match day at stadium.

For a stadium with a maximum capacity of 98,000 spectators, the number of free localities on sale is only 14,000. The result of the income generated by this new sale of the right to occupy a locality is distributed between the club and the subscriber. The average occupation in the stadium has grown in recent years, having gone from 73 to 80Thousand spectators in the last 8 years. The objective of improve installed capacity is complemented by other actions such as, for example, boxes and VIP lounges, which rent by seasons companies, institutions and individuals, the use of stadium dependencies for the holding of private events and hospitality areas.

The audio-visual rights market is another source of income of football clubs in Europe. The sale of television rights, propitiated by the end point of the monopoly of public television In the 1990s, was a significant quantitative leap in Club revenue. The third source of revenue is the sponsorship and the commercialization of products. The sponsoring companies were interested by increasing of number of viewers, especially through television broadcasts, an unparalleled way of exposing their brands and products. The

© 2018PNMReview Public & Nonprofit Management ReviewVol. 3.2 (2018) 116 JIBRALI & OUHADI, SPORT AND FINANCIAL PERFORMANCE ANALYSIS presence of the logo of the sponsors of sports clothing and footwear. Billboards on the grounds have gone from being static to becoming a real carousel.

The items that can be found in any of the official stores of the most powerful clubs in the world have also an important outlet on the market which, incidentally, produces a source of additional income to clubs. Another source of income, associated with the internationalization of the brand, is the organization of tours in other continents and make some friendly matches. The presence of Barcelona in Friendly matches, whether in the US, Japan, China, Korea or the Arab world Arouses great expectation and supposes an extra direct income per party at the same time that it reinforces the international presence strategy of the brand with which positive economic consequences are obtained over time.

c- Financial and sport situation after transition : 2010-2015

After conducting a detailed study on the economic and sporting situation in the period before and after nomination of Laporta as the new club president and after analysing the transition experienced by the club and giving a presentation of the transition of FC Barcelona during that period, we will present in this chapter a brief analyse of financial and sport performance of our club during the last five years in order to understand the current situation of FC Barcelona and to confirm the hypotheses put in place previously and which affirms the positive correlation that exist between sport and financial variables. . Financial situation a- Incomes

Annual report of Fc Barcelona 2015

Annual league 2015deloitte3

The incomes increased every year, the two tables show us the exponential evolution in the club's revenues, which went during one year from the fourth to the second position. The strategy putted in place in 2003 by Laporta has given its fruits, its development and its implementation by the new members of direction presided byJosep Maria Bartomeuhas given a good result. As we can see from the graph above, resources have constantly evolved and increased by 35% over a period of 5 years. During the last few years, the club's commercial performance has evolved, Catalans continued to sign sponsorship contracts, improvements in sponsorship contracts (such as Audi, Beko and telefonica). Before the end of the sponsorship of Qatar Airways at the end of the 2016/2017 season, the club entered into an agreement with Rakuten (E-commerce company) to become the club's overall sponsor from the 2017 / 18, for a period of four years.At the end of the 2015/16 season, Barca's revenues increased by € 17.7 million (10%) to € 199.8 million, the second highest in theMoney league.

3(Deloitte, 2015)

A- Expenditures

Annual report of Fc Barcelona 2015/2016

Operating costs increased by 8% over the previous season, from €581 million to €630 million. Mainly due to:

• Sporting and non-sporting salaries increased by 4% and 3% respectively, following bonuses paid out due to the first teamwinning several trophies (La Liga, the Copa del Rey, the European Super Cup and the Club World Cup).

• Operational costs increased by 10% has a result of higher sales and marketing activities (sponsorships, events), summer tourtravel costs and the holding of elections.

During the seasons 2009/2010 and 2010/2011, the club didn't achieve a good financial performance, the first year showed a deficit, but start from the season of 2011/2012, the resources covered all the expenses and generated a Net income. Despite the significant increase in costs over the past two years due to the rise in salary levels, the club continues to generate good financial results.

Deloitte Report 2014/2015

Not only the club revenues that have evolved over the last few years, but also the social side of the club, In that season, FCBarcelone is the club most followed by fans on social networks, thus exceeding the main Rival "Real Madrid" on the three major networks: Facebook, Twitter and Instagram.

. Sport Performance

2009/ 2010/ 2011/ 2012/ 2013/ 2014/ 2015/

2010 2011 2012 2013 2014 2015 2016

La liga Yes yes 2ème Yes 2ème Yes Yes

1/8 de Semi Copadelrey Final Yes Final Yes Yes finale final Champions Semi Semi Semi ¼ ¼ Yes yes league final final final final final Supercoupe Yes yes Yes Final Yes No Final spain Supercoupe yes No Yes No No No Yes UEFA

World cup yes No Yes No No no yes

During the five years studied, we will notice that the club has shown a good sports performance, however, and if we return to our study on financial performance, we found that during the season of 2009/2010 and 2010 / 2011 the clubhad financial problems in spite of the good sporting success experienced by FC Barcelona during this period, as the club had won 7 competitions and had a good classification in two other competitions (finalist and semi-finalist), which calls into question The validity of the hypothesis of the cause-and-effect relationship existing between that two variables.

During the last years, four coaches have succeeded, two of them realised an exceptional performance, won 22 trophies, during a single year, 6 trophies won with Pep Guardiola team, the first club in history who made that.

Conclusion Since 2003, the club's management team has made radical changes, which allow him today to become the leading European and world power, not only at the sporting level, but beyond, financially, socially And economic. The application of the vicious circle in the sporting field has given it's fruits, and from this case study we have carried out, we can understand that today, clubs and sports organizations in general can't nevermore be considered as non-profit associations with one and simple objective achieving some sports results, beyond all of them, the appearance of professionalization has proved that these organizations must be managed like traditional companies because their importance is equal And even exceeds these firms. Our study also focused on the most important variables of the club, we talk about the sporting and financial side, and the results obtained over the period studied shows thestrong correlation existing between that two variables.

References

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